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Small banking on the rise
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October 13, 1997: 9:39 p.m. ET
Community institutions seek to put a personal face on profits
From Correspondent Ceci Rodgers
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CHICAGO (CNNfn) - Even as the big institutions continue to grow through devouring one another, small-town, community banking appears to be enjoying a profitable resurgence.
In recent years, the belief that "bigger banks are better banks" has fueled a flurry of mergers and acquisitions. Over the course of the last decade, the number of banks in the United States has dwindled from more than 14,000 to just over 9,000.
Despite this mania for consolidation, some typically conservative bankers are taking some risks. They're starting their own small, independent banks. Last year alone, community bankers chartered 146 of these new -- or so-called "de novo" - banks.
And they're reaping the rewards.
The First Bank and Trust of Evanston is one of this new wave of banks making a profit from smallness. "We know our customers," explains Howard Kain, president of the Illinois bank. "They know us. They know they can come in and get an answer from one of us, because there's always one of us here."
Although Kain's bank has expanded over the last three years, it is still well under 0.1 percent the size of massive First Chicago. However, it's the personal touch that brings customers into banks like it.
Richard Thorsen, president of the Community Bank of Ravenswood, another independent Chicago-area institution, agrees. "I kept getting feedback from neighborhood business people who … missed the quick response time and they missed the personal touch .… people are frustrated because the big banks aren't responsive."
That doesn't mean smaller banks are cheaper. Service fees at independent banks tend to be just as high, if not higher, than those at much larger institutions. Still, small-bank customers find that a satisfactory exchange for intimate customer service and the versatility to make quick, personal decisions.
"Those banks are doing quite well," says Mike Sammon, senior vice-president at Howe Barnes. "The rule of thumb years ago was three years for a de novo bank to become profitable. These banks are getting profitable in 18 months today, and they're growing rapidly."
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